If an economy consumes 75 percent of any increase in income,then an increase in autonomous investment of $1 billion could result in an increase in Real GDP of as much as

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Quizplus · Accepted Answer

The multiplier is 1/(1-MPC) = 1/(1-0.75) = 4. So, an increase in autonomous investment of $1 billion could result in an increase in Real GDP of as much as $1 billion * 4 = $4 billion.

If an Economy Consumes 75 Percent of Any Increase in Income,then